GAC Shipping (India) Pvt Ltd and Dr. Roy Mathews and Anil K. Menon and Miriam Mathews and Balagopal P.G. and P. Santhosh Kumar V. Union of India and Director General of Foreign Trade (DGFT) and Joint Director General of Foreign Trade and Directorate of Revenue Intelligence and Commissioner of Customs

WP(C)/18500/2021

AI Insights

The case involves GAC Shipping (India) Pvt Ltd and its directors, who are petitioners, challenging a show cause notice issued by the Directorate of Revenue Intelligence (DRI) based on Circulars that questioned their eligibility for benefits under the SEIS for the years 2015-16 and 2016-17. The petitioners argued that as the principal service providers receiving foreign exchange remittances, they were entitled to the SEIS benefits without any reduction for sub-contracted services. The respondents, including the Union of India and the DRI, contested this interpretation. The court's decision was influenced by a precedent set by the Bombay High Court, which had quashed similar Circulars in a related case, thereby supporting the petitioners' claim.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 802269 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 16-03-2023
• Assessment Year: misc
• Other Referred Cases: Atlantic Shipping Pvt. Ltd. v. Union of India (2021) SCC OnLine Bom 323
• Laws Referred To: Foreign Trade (Development and Regulation) Act, 1992, Income-tax Act, Customs Act, Goods and Services Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S MANU
• Assessee Lawyers: JOSEPH KODIANTHARA; V MARKOS
• Keywords: Convertible foreign exchange; Foreign Trade Policy; Foreign Trade Policy; Logistics; SEIS; Service Exports from India Scheme; Shipping Services
• Section: 5; 28AAA

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE T.R.RAVI THURSDAY, THE 16TH DAY OF MARCH 2023 / 25TH PHALGUNA, 1944 WP(C) NO. 18500 OF 2021 PETITIONERS: 1 GAC SHPPING (INDIA) PVT LTD. GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003, REPRESENTED BY ITS DIRECTOR, DR.ROY MATHEWS. 2 DR.ROY MATHEWS DIRECTOR, M/S.GAC SHIPPING (INDIA) PVT.LTD., GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003. 3 ANIL K.MENON DIRECTOR, M/S.GAC SHIPPING (INDIA) PVT.LTD., GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003. 4 MIRIAM MATHEWS DIRECTOR, M/S.GAC SHIPPING (INDIA) PVT.LTD., GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003. 5 BALAGOPAL P.G. GENERL MANAGER (ACCOUNTS), M/S.GAC SHIPPING (INDIA) PVT.LTD., GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003. 6 P.SANTHOSH KUMAR CHIEF FINANCIAL OFFICER, M/S.GAC SHIPPING (INDIA) PVT.LTD., GAC HOUSE, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003. SRI BY ADVS. SRI JOSEPH KODIANTHARA (SR.) V.ABRAHAM MARKOS SRI ABRAHAM JOSEPH MARKOS SRI ISAAC THOMAS SRI ALEXANDER JOSEPH MARKOS SRI SHARAD JOSEPH KODIANTHARA RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY ITS SECRETARY TO THE GOVERNMENT, MINISTRY OF COMMERCE AND INDUSTRY, UDYOG BHAWAN, NEW DELHI - 110 011. W.P.(C)No.18500/2021 2 2 DIRECTOR GENERAL OF FOREIGN TRADE (DGFT) UDYOG BHAWAN, H-WING, GATE NO.02, MALUANA AZAD ROAD, NEW DELHI - 110 011. 3 JOINT DIRECTOR GENERAL OF FOREIGN TRADE 5TH FLOOR, A-BLOCK, KENDRIYA BHAWAN, KAKKANAD, COCHIN - 682 037. 4 DIRECTORATE OF REVENUE INTELLIGENCE COCHIN ZONAL UNIT, VYLOPILLI ROAD, ST.THOMAS LANE, PALARIVATTOM, KOCHI - 682 025, REPRESENTED BY ITS SENIOR INTELLIGENCE OFFICER. 5 COMMISSIONER OF CUSTOMS CUSTOMS HOUSE, WILLINGDON ISLAND, COCHIN - 682 009. BY ADVS. SHRI.S.MANU, DSG OF INDIA THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.03.2023, THE COURT ON 16.3.2023 DELIVERED THE FOLLOWING: W.P.(C)No.18500/2021 3 T.R. RAVI, J. -------------------------------------------- W.P.(C)No.18500 of 2021 -------------------------------------------- Dated this the 16th day of March, 2023 JUDGMENT Heard Senior Advocate Sri Joseph Kodianthara instructed by Advocate Sri Abraham Joseph Markos on behalf of the petitioners and Sri S.Manu, learned DSGI on behalf of the respondents. 2. The 1st petitioner is a Private Limited Company principally engaged in the business of Shipping Services and Logistics. The Company is registered under the Central Excise and Service Tax provisions as well as the Customs Act. The Company is an assessee under the Income-tax Act and is also registered and assessed under the GST. As part of its business of Shipping Services, the Company also acts as Shipping Agents to various Foreign Liners coming into Indian Ports. The entire work from the entry of the concerned ship to the Indian waters till its departure from Indian waters is co-ordinated and carried out by the 1st petitioner as the Shipping/Steamer Agent. Some of its specific services are sub-contracted or got done by other service providers including statutory and monopolistic functions to be performed by Ports. The entire payment for all these services including those required by other service providers is received by the petitioners in convertible foreign exchange and from out of the said W.P.(C)No.18500/2021 4 amounts, amounts due to the local service providers including Ports are paid by the 1st petitioner in local currency. 3. The Foreign Trade Policy of the Central Government is drawn up at regular intervals as empowered by Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter referred to as 'the 1992 Act'). In terms of the 1992 Act, the Foreign Trade Policy for the period 2015-2020 ('FTP 2015-2020' for short) was notified, copy of which has been produced as Ext.P2 along with the writ petition. Under Chapter 3 of the Policy, the benefits under “Export from India” Schemes are narrated. Clause 3.07 of Chapter 3 of the FTP 2015-2020 introduced a new reward scheme for the Service Exports from India Scheme (SEIS) to encourage and maximise export of notified services from India. The eligibility conditions are laid down in clause 3.08. Clause 3.08(c) says that payment of Indian rupees for service charges earned on specified services shall be treated as receipt in deemed foreign exchange as per guidelines of the Reserve Bank of India. Chapter 9 of the policy contains the definition of “Service” and “Service Provider”. The petitioners submit that the entire services done by the 1st petitioner as well as work done through other sub-contractors qualifies for SEIS under the head “Supporting Services of Maritime Transport”. 4. The 1st petitioner had applied for grant of SEIS benefit for the year 2015-16 and for the year 2016-17. Several communications W.P.(C)No.18500/2021 5 between the 1st petitioner and the respondent in this regard have been produced along with the writ petition. Finally, the 1st petitioner was given the benefit of the Scheme. The benefit is given in the form of credit scrips. 5. In 2018, two Circulars were issued as Circular No.06/2018 dated 22.5.2018 and Circular No.8/2015-20 dated 21.6.2018, copies of which have been produced as Exts.P8 and P9 respectively. Exts.P8 and P9 created a doubt as to whether the 1st petitioner as the Principal Service Provider and the recipient of the entire foreign exchange remittances including the charges with respect to sub- contracted services would be entitled to the entire SEIS benefits or whether the sub-contractor would be entitled to the SEIS benefits on the sub-contracted service rendered by him. Clarifications have been sought by the 3rd respondent to which the 1st petitioner had replied stating that the 1st petitioner's application is in accordance with para.3.08 of the FTP 2015-20 and that the 1st petitioner was entitled to the entire benefit. 6. While so, on a similar issue arising with respect to M/s.Atlantic Shipping Pvt. Ltd., the jurisdictional Registering Authority refused to issue the SEIS benefits and issued show cause notice for recovery of the SEIS already granted, placing reliance on Exts.P8 and P9 Circulars. The action was challenged in W.P.No.1827 of 2019 before the High Court of Judicature at Bombay, which resulted in W.P.(C)No.18500/2021 6 Ext.P15 judgment dated 9.3.2021 by a Division Bench of the Bombay High Court [Atlantic Shipping Pvt.Ltd. v. Union of India (2021) SCC OnLine Bom 323]. After an elaborate discussion and consideration of the Foreign Trade Policy, the 1992 Act, and the impugned Circulars issued in 2018, the Court held that the two Circulars insofar as they seek to add or amend the provisions of the FTP 2015-20 by inserting additional conditions thereby curtailing the rights/benefits claimed by the petitioner therein as Service Provider was ultra vires the Foreign Trade Policy 2015-20. The Court set aside the show cause notices issued and quashed the order whereby the benefit was refused to the petitioner therein. Even though Ext,P15 judgment has been challenged before the Hon'ble Supreme Court in S.L.P(C)Nos.020307/2022, the Court has only condoned the delay in fling the Special Leave Petition and the matter is pending admission. Since the Circulars have already been quashed by a High Court, the respondents are not entitled to support their action, on the strength of the said Circulars. In the case on hand, the petitioners have challenged Ext.P16(f) which is a show cause notice issued, based on the contents of Exts.P8 and P9 Circulars. The petitioners have also sought a declaration that Section 28AAA is unconstitutional and ultra vires under Section 12 of the Customs Act. If the question regarding the validity of the Circulars is decided in favour of the petitioner, there will be no necessity to go into the validity of Section 28AAA of W.P.(C)No.18500/2021 7 the Customs Act, as no action pursuant to Exts.P8 and P9 can be undertaken. 7. I have gone through the judgment of the Division Bench of the Bombay High Court in W.P. No.1827 of 2019, and I am in respectful agreement with the law laid down by the Court. I do not find any reason to take a different view. The petitioners are entitled to succeed. 8. In the result, Ext.P16(f) summons is quashed. Since Exts.P8 and P9 have already been quashed by the Bombay High Court, it is not necessary to quash the same again. It is declared that the respondents are not entitled to proceed against the petitioners based on Exts.P8 and P9 Circulars. Ext.P21, which is again a notice issued based on Exts.P8 and P9 Circulars shall not be proceeded with. Sd/- T.R. RAVI JUDGE dsn W.P.(C)No.18500/2021 8 APPENDIX OF WP(C) 18500/2021 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF AGENCY APPOINTMENT EMAIL ISSUED TO THE 1ST PETITIONER. Exhibit P2 TRUE COPY OF THE FOREIGN TRADE POLICY 2015- 20. Exhibit P3 TRUE COPY OF THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS). Exhibit P4 TRUE COPY OF APPENDIX 3D IN THE HANDBOOK OF PROCEDURES TO THE FOREIGN TRADE POLICY 2015- 20. Exhibit P5 TRUE COPY OF THE APPLICATION SUBMITTED ON 15/01/2018 ALONG WITH THE COMPUTATION STATEMENT AS ANNEXURE 1. Exhibit P5A TRUE COPY OF THE DEFICIENCY LETTER OF 14/03/2018 SENT BY THE 2ND RESPONDENT. Exhibit P5B TRUE COPY OF THE LETTER DATED 20/03/2018 SENT BY THE 1ST PETITIONER TO THE 3RD RESPONDENT. Exhibit P5C TRUE COPY OF THE DEFICIENCY LETTER DATED 04/04/2018 ISSUED BY THE 3RD RESPONDENT. Exhibit P5D TRUE COPY OF THE REPLY LETTER DATED 11/04/2018 ISSUED BY THE 1ST PETITIONER TO THE 3RD RESPONDENT. Exhibit P5E TRUE COPY OF THE LETTER DATED 31/05/2018 ISSUED BY THE 3RD RESPONDENT. Exhibit P5F TRUE COPY OF THE LETTER DATED 18/06/2018 ISSUED TO THE 2ND RESPONDENT. Exhibit P5G TRUE COPY OF THE E-MAIL DATED 11/07/2018 OF THE 1ST PETITIONER. Exhibit P5H TRUE COPY OF THE E-MAIL OF 12/07/2018 OF THE 3RD RESPONDENT. Exhibit P5I TRUE COPY OF THE LETTER DATED 18/09/2018 ISSUED BY THE 1ST PETITIONER. Exhibit P5J TRUE COPY OF THE LETTER 16/10/2018 ISSUED BY THE 1ST PETITIONER. Exhibit P6 TRUE COPY OF THE APPLICATION SUBMITTED BY THE 1ST PETITIONER ON 28/03/2018 IN FORM W.P.(C)No.18500/2021 9 ANF-3B FOR THE YEAR 2016-17. Exhibit P7 TRUE COPY OF THE REVISED APPLICATION SUBMITTED BY THE PETITIONER FOR THE YEAR 2015-16 DATED 19/12/2018. Exhibit P7A TRUE COPY OF THE REVISED APPLICATION FOR THE YEAR 2016-17 SUBMITTED MANUALLY ON 07/01/2019. Exhibit P8 TRUE COPY OF THE CIRCULAR NO.6/2018 DATED 22/05/2018. Exhibit P9 TRUE COPY OF THE CIRCULAR NO.8/2015-20 DATED 21/06/2018. Exhibit P10 TRUE COPY OF THE LETTER DATED 05/02/2019 FOR THE YEAR 2015-16 ISSUED BY THE 3RD RESPONDENT. Exhibit P11 TRUE COPY OF THE LETTER DATED 01/02/2019 FOR THE YEAR 2016-17 ISSUED BY THE 3RD RESPONDENT. Exhibit P12 TRUE COPY OF THE SCRIPT ISSUED FOR THE YEAR 2015-16. Exhibit P13A TRUE COPY OF THE SCRIP ISSUED FOR THE YEAR 2016-17. Exhibit P13B TRUE COPY OF THE SCRIP ISSUED FOR THE YEAR 2016-17. Exhibit P13C TRUE COPY OF THE SCRIP ISSUED FOR THE YEAR 2016-17. Exhibit P13D TRUE COPY OF THE SCRIP ISSUED FOR THE YEAR 2016-17. Exhibit P13E TRUE COPY OF THE SCRIP ISSUED FOR THE YEAR 2016-17. Exhibit P14 TRUE COPY OF THE CHAPTER-3 OF THE HANDBOOK OF PROCEDURE. Exhibit P15 TRUE COPY OF THE JUDGMENT DATED 09/03/2021 PASSED BY THE HONOURABLE HIGH COURT OF JUDICATURE AT BAOMBAY IN W.P.NO.1827/2019. Exhibit P16 TRUE COPY OF THE E-MAIL DATED 05/07/2021 RECEIVED BY THE 5TH PETITIONER FROM THE 4TH RESPONDENT. Exhibit P16A TRUE COPY OF THE REPLY E-MAIL DATED 07/07/2021 SENT BY THE 5TH PETITIONER TO THE W.P.(C)No.18500/2021 10 4TH RESPONDENT. Exhibit P16B TRUE COPY OF THE E-MAIL DATED 08/07/2021 SENT BY THE 4TH RESPONDENT. Exhibit P16C TRUE COPY OF THE E-MAIL DATED 23/07/2021 SENT BY THE 5TH PETITIONER. Exhibit P16D TRUE COPY OF THE E-MAIL DATED 28/07/2021 SENT BY THE 5TH PETITIONER. Exhibit P16E TRUE COPY OF THE E-MAIL DATED 25/08/2021 SENT BY THE 5TH PETITIONER. Exhibit P16F TRUE COPY OF THE SUMMONS DATED 26/08/2021 RECEIVED BY THE 5TH PETITIONER FROM THE 4TH RESPONDENT. Exhibit P17 TRUE COPY OF THE LETTER DATED 06/09/2021 SENT BY THE PETITIONERS TO THE 4TH RESPONDENT WITHOUT ANNEXURES. Exhibit P18 TRUE COPY OF THE INTERIM ORDER DATED 05/02/2021 PASSED BY THE HONOURABLE HIGH COURT OF JUDICATURE AT BOMBAY IN WP(L) NO.5586/2020. Exhibit P19 NIL. Exhibit P19A TRUE COPY OF THE JUDGMENT OF THE HONOURALE BOMBAY HIGH COURT IN CLEARTRIP PRIVATE LTD. V. UNION OF INDIA 2016(42) S.T.R.948. Exhibit P19B TRUE COPY OF THE JUDGMENT OF THE HONOURABLE BOMBAY HIGH COURT IN NEELKAMAL REALTORS POWER PVT.LTD. V.UNION OF INDIA 2019 (31) G.S.T.L.53 (BOM.) Exhibit P20 TRUE COPY OF THE INTERIM ORDER DATED 09.09.2021 OF THIS HON'BLE COURT IN THIS W.P.(C) NO. 18500 OF 2021 Exhibit P21 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 16.12.2022 ISSUED BY THE 3RD RESPONDENT TO THE 1ST PETITIONER COMPANY Exhibit P22 TRUE COPY OF THE LETTER DATED 23.12.2022 ISSUED BY THE PETITIONERS TO THE 3RD RESPONDENT Exhibit P23 TRUE COPY OF THE REPLY DATED 10.01.2023 TO EXHIBIT P21 FILED BY THE PETITIONERS BEFORE THE 3RD RESPONDENT. "